The Coronavirus is taking almost all media space in Ghana and almost every country around the world. Daily updates have become the new media lifestyle. Wars, abuse, climate, politics, earthquakes, flooding and economic news (except about economic consequences of the pandemic) have lost their importance.
Ghana has (in my opinion) bigger problems than the Coronavirus, although the outbreak of Coronovirus has made certain problems more visible and more urgent.
We have huge housing deficit in Ghana on one side and we have staggering rent prices on the other side.
Houses that attract 500 – 800 Usd rent in many European and American cities are rented out for 1,500 – 2,000 Usd in Accra. The same for offices, shops and other properties.
People who started investing in properties 10 – 20 years ago made profits any real-estate developer in the developed world would dream of.
Landlords and other owners of properties could almost ask any price they wanted. Two or three years rent in advance was the norm, although the law allowed only six months, but who cared. Not the landlord, not the tenant because he/she was in dire need of accommodation.
Foreigners in Ghana drove the prices of villa’s and nice apartments in a first class enclave with swimming pool sky-high. A good house in such an enclave could go between 4,000 – 7,000 Usd a month with one year (at least) advance payment and monthly service cost based on nothing between 200 – 500 USd.
A two-bedroom furnished apartment in the then new Villagio could be rented out for between 2,500 and 3,000 Usd.
Office are rent out by square meter prices excluding service costs that made the average European and American investor jealous. One of the first Airport office towers; “The Silverstar Tower” was the talk in town and every company respecting itself wanted an office in “The Silverstar”.
Land prices, already high mostly because of all the risk of losing because of some dishonest sellers went through the roof.
Single plots went for 1 million and more. I remember I had a consultant job for a foreign university to look for first class accommodation in Ridge with a budget of 2.5 million Usd. Several days later the property, I already estimated to be overpriced was sold for 4.2 million dollar and changed hands several months later for 5 million Usd.
The reaction on the market was predictable, every investor wanted real-estate in Ghana. Solid and honest investors, but also dishonest investors and money-launderers.
Enclaves and estates with townhouses and villa’s were shooting up all over the center ring in Accra. High-rise apartment blocksunder construction and ready to move in could be found at every street corner at Ridge, Labone, Cantonments, Airport Residential and Dzorwulu.
The developers mostly sold these “from plan”, meaning in Europe that you do a down-payment and gradually pay the rest whilst your future house is under construction and after the apartmet or house is ready and fully paid your keys will be handed over to you.
In Ghana it mostly meant: Pay all, we will start when 50-80% of the enclave or high-rise building is sold and we will finish as soon as convenient for us and handover the keys.
That situation started to change about 3-4 years ago.
Some houses and apartments were still sold. But a friend of mine got her money back (after a court case against the seller) because the developer didn’t have the money to finish the apartment block.
The ones that started before this crisis are stuck with half or more empty apartment blocks.
Others were smart enough to stop work and look all over the earlier mentioned areas where there are uncompleted apartment blocks. His includes some of the most prestigious ones, like opposite 37 hospital, the seaview apartments of Taraconi next to La Palm hotel at Labadi Beach, Hotel, shopping Mall, restaurants and apartments next to the Airport Police station and others.
The former Shangrila Hotel was broken down for another luxurious enclave and hasn’t taken off yet.
Currently 40-45% of office space in Accra is just standing there empty. The exception are some brand new buildings but almost all the tenants in there come from projects finished between 2010 – 2015.
There are a few questions to answer in this situation.
What about the quality of the structure when abandoned for a long period of time?
Will the market pick up to its previous levels?
Will the prices return to their previous levels?
Many people, especially landlords have not adapted to this “new” situation. Especially the ones that have been riding the hype without any special thing to rent: because of the high market prices many companies resorted to renting former houses.
The owners profited of the shortage of affordable office and company space and placed their prices a few hundred dollar a month lower than the purposely built ones. Some of them moved to a cheaper area, others never lived in Ghana and others decided to live on the rent of their main house and moved into their boy’s quarters.
Ten years ago, a friend of mine rented office space (in one of the former houses) around the Swiss Embassy for 5,000 Usd monthly, with annual and other increments he paid 8,000 Usd two years ago. The landlord passed by to talk about the new rent increment and my friend explained to him that the market went down and he wouldn’t accept an increment that year. Instead of the landlord checking the market situation, he told his tenant for 10 years to leave.
Long story short: My friend rented another house on the other side of the same street for 4,500 Usd with a rent freeze period of 5 years (which he regrets now). Coincidently after his first office building had been empty for 1.5 year another friend of mine rented the building as a practice space for 4,000 Usd a month.
The loser?: The Landlord.
The winner?: The tenant, his company will be more profitable.
Will all these expensive houses, apartments and offices be rented against lower prices in the future?
Will landlords be ready to bring down their “easy” income?
Will real-estate developers lower their rents so more Ghanaians can afford to live in an apartment in a market where there is a large housing deficit?
Will private and stool land owners start leasing their lands for normal market related prices?
Government is investing in affordable housing (unfortunately only for public servants) why can’t government buy some of these apartment blocks and help to ease the housing problem?
Is investing in real-estate in Ghana still a good investment?
My answer is: yes, but forget about annual profits of 20-30% on your investment.
Start targeting a much more realistic 5-8% and all will be well.
The author, Nico van Staalduinen is a
concerned Ghanaian and columnist of African Entertainment
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